Market interest in REITs seen to continue in 2022

By Keren Concepcion G. Valmonte, Reporter

INVESTORS and property developers alike are expected to continue supporting the interest in real estate investment trusts (REITs), which will “remain a bright spot” in 2022.

“We expect that companies will look into launching their own REITs as an alternative to raise capital for future expansions and build further their credibility in the market,” JLL Philippines Vice-Chairman Joey M. Radovan said in an e-mail on Dec. 7.

Leechiu Property Consultants President and Chief Executive Officer David T. Leechiu is expecting a “healthy pipeline” of REITs next year.

“I think there will [potentially] be two [REITs] a month for the next 12 months, based on all the companies that we are talking to right now that are asking us to evaluate their portfolio,” Mr. Leechiu said in a video call on Dec. 15.

Property services firms are expecting the “next wave of REITs” to come from the industrial sector. 

“Industrial assets will be popular due to the improvement of manufacturing output and the need for more industrial spaces and warehouses,” Colliers Philippines Associate Director Joey Roi H. Bondoc told BusinessWorld in an e-mail on Dec. 6.

JLL Philippines’ Mr. Radovan said the notable difference with the office sector lies in the location of the industrial firms’ assets, which will not be based in the core central business districts.

DoubleDragon Properties Corp. and Jollibee Foods Corp. have expressed plans to issue an industrial REIT next year through DoubleDragon’s industrial leasing subsidiary, CentralHub Industrial Centers, Inc.

Aside from the industrial sector, RCBC Securities, Inc. President Raul P. Ruiz said in an e-mail on Dec. 21 that the market “might see more REITs of commercial properties,” such as retail spaces due to the expected economic reopening.

Meanwhile, Santos Knight Frank Head of Research Jan Paul D. Custodio said companies may also issue REITs with portfolios featuring residential, hospitality, and energy assets.

“Other major players have also expressed interest for a potential REIT IPO (initial public offering) by 2022 such as SMDC (SM Development Corp.) and Vista Land (& Lifescapes, Inc.),” Mr. Custodio said in an e-mail on Dec. 15.

Citicore Energy REIT Corp. is looking to tap the capital markets next year to build new solar plants. It will be the first energy-focused REIT listing in a sea of REITs with assets mostly focused in the office sector.

The Philippines currently has five REITs listed on the stock exchange. These are AREIT, Inc., DDMP REIT, Inc., Filinvest REIT Corp., RL Commercial REIT, Inc., and MREIT, Inc. 

AREIT made its debut at the local bourse in August 2020, while four firms went public this year.

“With four REIT companies being listed publicly despite the pandemic, this signals a strong confidence for aspiring players to enter the public markets, capitalizing particularly on industrial and office assets,” KMC Savills Co-Founder and Managing Partner Michael McCullough said.

Timson Securities, Inc. Trader Darren Blaine T. Pangan noted that most of the listed REITs performed well year-to-date, which may encourage more companies to consider the investment class.

“Retail investors may feel excited to explore an expanded menu of REITs so that they could have new avenues for portfolio diversification,” Mr. Pangan said via e-mail on Dec. 28.

China Bank Securities Corp. Research Director Rastine Mackie D. Mercado noted that occupancy rates, as well as asset valuations, are expected to improve.

“Occupancy rates are expected to rise with improving economic and pandemic conditions and escalation rates provide a built-in inflation hedge,” China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said in an e-mail on Dec. 29.

“Asset valuations are also expected to improve in relation to improving economic activity,” he added.

Coming into 2022, investors will no longer be strangers to the relatively new investment asset.

“Investors will be more discerning about which ones are better, which ones are worse, which ones will have the better-quality portfolio, better-quality tenants, and better-quality rents,” Mr. Leechiu said.